Most entrepreneurs hate their competition. Many of my friends would come up with a brilliant business idea, only to decide not to pursue it because someone else has already begun doing it. But if anything, they should be happy, because competition means two things: validation of a business idea, and pressure to innovate. If someone else is in your market, at least you know it’s something worth solving. And if someone else is in your market, it means you have to create something truly useful. But investors don’t always see this perspective… if anything, the first question I get asked is “how are you going to deal with Intuit as competition?” It’s a reasonable question that I’ve put a lot of thought into.

The first thing to keep in mind is that for most internet companies, competition is irrelevant. As our friends at Zoho.com say, “… if there’s anything I’ve learned from my years in the tech world is that companies don’t get killed by competition, they usually find creative ways to commit suicide.” Zoho is right, and we remind ourselves of that everyday here at Indinero. Chances are that your web startup will run out of funding, a co-founder will leave, or your inability to create a useful product will lead to the destruction of your own enterprise. And if you’re able to get past those first barriers to entry, then I’ll allow you to think a little about your competitors.

Now lets say that your company has an infinite cash runway, your company is capable of building a product, and you know that it won’t commit suicide anytime soon. Even then, competition shouldn’t be your primary concern. If you created a list of all of your competitors, 90% of them could probably be crossed off your list of concern because of their inability to innovate quickly. And of the remaining 10%, plot them on two axes: who is innovating, and who are you losing potential business to. You’ll find that more often than not, no competitor is on the top right of the graph. It’s often a big company (in our case, Intuit) that we’re losing business to, and we know that they’re not innovating at the pace that we are. More nimble startups, on the other hand, often make for good inspiration! Their mere existence, even if they have a better product than you do, does not mean that they’ll be the reason for your failure. Keep in mind that your company will probably commit suicide in a creative way, and you’ll never have the opportunity to evade the startup competitors you fear.

One valuable lesson I learned back in my middle school days was that having lots of competition was a good thing: I was in the web hosting space, which was and still is notorious for having terrible service providers. The rules I listed above applied to web hosting 5 years ago in that 90% of the competition was irrelevant, and many of the big players weren’t doing anything particularly creative. There was an obvious pressure to do more than just provide diskspace and bandwidth to clients, which means that companies that couldn’t keep up were able to fail earlier in the process. If anything, these failed companies should thank the competition for having saved them time!

So the next time you think of a business idea, embrace your competition and build your offering around unique things that your “big rival” isn’t doing, and will likely never do. And if a friend or investor asks about your competition, you’ll know precisely how to respond.